Investors preferring quantitative route

Index funds are becoming increasingly popular in Europe, according to a Morgan Stanley report. The development is a particular boon for asset managers such as Barclays Global Investors and State Street Global Advisors, which have long been pushing enhanced indexed products with varying degrees of success.

Besides enhanced products, pure passive products and exchange traded funds are also benefiting. In the retail sector, index funds account for 10 per cent of UK funds and 2 per cent of continental European funds.

Mike O’Brien, head of relationship management at BGI, expects these figures to rise. He said: “We are seeing people moving into quantitative, scientifically run products because they are seen as low risk. There is continued disillusionment with traditional, low-risk managers.”

Enhanced indexation is getting a particular boost from such investors. “If you are invested heavily in index funds in these market conditions, one per cent extra performance becomes quite significant”, explained Mr O’Brien.